Reckoning

The later 1980s were a period of erratic growth—rapid but unstable. Tigers and sea turtles spurred development throughout the decade: East Asia’s “tiger” economies—Taiwan, Hong Kong, Singapore, and South Korea—paved China’s way in state-led, export-intensive growth. China's “Sea turtles” were the many overseas Chinese who brought capital and knowledge acquired abroad back to their mother country. However, unresolved contradictions lurked in the new political economy of Deng’s China. Frustrations over stalled political reform—enflamed by widespread urban economic grievances over inflation and corruption—erupted in street demonstrations that paralyzed the PRC in the spring of 1989. The Tiananmen crisis would have lasting political repercussions on the cause of democracy—but also unintended economic aftereffects.

Hong Kong Provided China with Capital

Japan Provided Support for Reform

Autocracy and Economic Freedom Brought Growth

Expectations Are the Most Important Growth Factors

Barry Naughton

Professor of Chinese Economics

Barry Naughton is a Professor of Chinese Economy at the University of California, San Diego. Naughton is an authority on the Chinese economy, with an emphasis on issues relating to industry, trade, finance, and China's transition to a market economy. Recent research focuses on regional economic growth in the People's Republic of China and the relationship between foreign trade and investment and regional growth. He is also completing a general textbook on the Chinese economy. Recently completed projects have focused on Chinese trade and technology, in particular, the relationship between the development of the electronics industry in China, Taiwan and Hong Kong, and the growth of trade and investment among those economies. His book, Growing Out of the Plan: Chinese Economic Reform, 1978-1993, which was published in 1995, is a comprehensive study of China's development from a planned to a market economy that traces the distinctive strategy of transition followed by China, as well as China's superior growth performance. It received the Ohira Memorial Prize in 1996. Naughton was named to the Sokwanlok Chair in Chinese International Affairs at UCSD in 1998.

So, what really happened in 1984 and '85 was not so much that reform started in the urban areas as that a new wave of urban reform started that certainly drew some very important elements from rural reform, but also reflected several years of frustrating experience and reformulating and trying to figure out an approach that would work in the Chinese circumstance. Now, clearly, the key leader in this was Zhao Ziyang. Zhao Ziyang had taken direct authority over economic policy in 1980, whereas the elders had been in charge of economic policy before that time, Chen Yun and Li Xiannian. So, Zhao Ziyang had been in charge for a while. He had to deal with a kind of conservative backlash in '81-'82, but he had weathered it, and he had thought carefully about how to maneuver in the direction that he wanted to move. And so, I think it really makes sense at this period to think of Zhao Ziyang as a – he’s like a defensive driver. He’s maneuvering. He knows he doesn’t have absolute power. You know, the elders like Deng Xiaoping and Chen Yun have more power than Zhao Ziyang does, but he has his hands on the day-to-day levers of authority, and he knows he has to keep the elders happy and yet find a way to push the system towards more flexibility and an opening towards marketization. And I think that as Zhao Ziyang does this, he also becomes, in a sense, more radical, that he begins to believe that the system really needs to be transformed into something that’s more of a truly market-based economy. And I think also he becomes committed to a degree of political reform. So, in that process, he works hard, and creates a model of economic reform that ultimately succeeds. But, at the same time, on both political and economic grounds, runs into increasing conflict with the elders. And that ultimately leads to the debacle at Tiananmen Square.